Indications will now be made as to the proper applicability of various types of reinsurance in different branches of insurance.
Application of Reinsurance to FIRE Insurance
Surplus treaty is most widely used. Quota share treaties are used by the newly established companies or with regard to new business of established companies.
The service of facultative reinsurance is also occasionally utilized, particularly with regard to bigger risks, where the standing treaty arrangement does not provide full automatic protection.
Excess of loss treaties are utilized for catastrophe risks or where there is possibility of accumulation of risks leading to conflagration fire, or where fire policies provide additional covers such as cyclone, hurricane flood etc.
Application of Reinsurance to MARINE AND AVIATION Insurance
Quota share and surplus are quite common even though facultative method is still very widely used.
Excess of loss and stop loss arrangements are also made in catastrophe hazards, such as, general average, total loss to hull etc.
Application of Reinsurance to ACCIDENT Insurance
All types of treaties are commonly used.
In cases of hazardous elements or where accumulation and catastrophe are apprehended or in cases of liability insurances, excess of loss or stop loss are most favored. Pools are considered in special types of risks, such as, crop insurance.
Facultative method is not much used unless the business is beyond the absorption capacity of the treaty.
Facultative method is also used when the ceding company does not wish to interest the treaties for some obvious reasons.
Application of Reinsurance to LIFE Insurance
The most commonly used type is the surplus treaty. Facultative cover is also still in use although in a very limited degree.
Pools are used for various types of impaired lives, such as, lives suffering from heart disease, blood pressure, diabetes etc.